Because I do a good bit of real estate law practice (representing condos, co-ops, affordable housing groups, and buyers and sellers in real estate transactions), I follow real estate legal and market news fairly closely. I was glad to see an article in the Saturday NY Times headlined: “A Flicker of Hope Appears in the Housing Market”. The article reports on housing studies, and confirms my own anecdotal observations from my legal practice. The gist of the article was that the housing bubble and bust created a huge oversupply of new housing in the country (which we definitely saw New York City). “But now,” the Times reported, “that oversupply appears to be close to vanishing…That reduction in supply does not in itself guarantee a revival for the depressed homebuilding industry, but it does remove one obstacle.”
In New York City, by 2007 new construction of high-rise condos, coops, apartment complexes and office buildings was at an all time high, and not just in Manhattan, but very much in Brooklyn, Queens and the other outer boroughs. Growing demand, easy financing, and a feeling that real estate prices only went up fueled the bubble. Then the recession pushed construction projects off the cliff. Many developments in the planning stages or under construction failed as prices fell, demand dried up and most significantly financing became difficult or impossible to get at normal commercial rates and terms. As a result supply was depressed as these numerous developments didn’t come on the market. Some developers changed plans for condos or coops to rental projects, and the last year saw increasing city rents which is one more factor in making purchasing more appealing.
The New York Times article explains the statistics of this supply adjustment this way:
“From 1997 through March of this year, the average rate (of new home sales) was 375 homes sold per 100,000 people. But, during the boom from 1997 until 2007, 1.8 million more new homes were sold than would have been expected under the historic average. Since 2007, two million fewer homes have been sold than would have been expected. That calculation would seem to indicate that there is no longer a large overhand of available new homes for sale.”
The article points out that, while the real estate market is still depressed in many areas (but, maybe not as much in New York City), “…the number of sales in the first quarter of this year was up 17 percent from the same period in 2011. That was also the best year-over-year gain since 2004.”
The article is based on national statistics, but in the New York City metro area, prices and demand appear to be on steroids compared to national surveys. Rising rents, falling supply, increasing demand and great rates and terms on mortgages make the market attractive for buyers and gives sellers who have been frustrated in recent years new hope. If you’re considering a real estate purchase, or sale, think seriously about getting in the action now. It’s hard to predict, but the notion of rising demand and the possibility of inflation that would raise rates, therefore making mortgage money much more expensive, are reasons to move now.